Website

How to deduct ZUS contributions on the basis of income tax?

When running a business, entrepreneurs are obliged to pay ZUS contributions. It is worth knowing that ZUS contributions are not only an obligation to pay, but also a privilege to deduct them by the taxpayer, which translates into a lower income tax. Let's check how to deduct ZUS contributions when settling income tax!

The impact of ZUS contributions on income tax

ZUS contributions may be recognized as tax deductible provided that they have been paid. The payment of ZUS contributions should be confirmed, for example, by a payment receipt or confirmation of a transfer from a bank statement. Depending on the type of contributions, they can affect your income tax in three ways:

as a deduction from the tax base in the advance tax;
as a tax deduction in advance tax;
as a cost in the KPiR.

In the case of health insurance contributions, they can only be included as a tax deduction in advance income tax. Tax changes to be introduced by the New Polish Deal concern, inter alia, the method of settling the health insurance contribution. According to the government's announcements, entrepreneurs will not be able to deduct the health insurance contribution from the tax despite paying it.Details in the article: New Polish Order - health insurance premium dependent on income and without deduction. Contributions to the Labor Fund are recognized only as an expense in the KPiR. On the other hand, social contributions (retirement, disability, accident and sickness) can be recognized directly as an expense in column 13. KPiR - Other expenses or as a deduction from the tax base in the advance tax.

social contributions

health contributions

contributions to the Labor Fund

deduction in advance payment

Yes

Nope

cost in KPiR

Yes

Nope

Yes

In the case of health insurance contributions, the full amount of contributions is not deducted, i.e. 9% of the calculation base, and only 7.75% of the calculation base.

How to deduct ZUS contributions in various forms of taxation?

Taxpayers can choose the most favorable form of taxation from the point of view of the amount of the tax rate or possible reliefs that they can use when generating an annual tax return. It is also worth knowing how to deduct ZUS contributions in each of them.

Tax scale and flat tax versus social security contributions

In the case of these two forms of taxation, entrepreneurs have the greatest freedom to choose how their ZUS contributions will be settled. Both when using the tax scale (17% / 32%) and the flat tax (19%), the tax base is income, i.e. revenues reduced by the costs of obtaining them. This means that the taxpayer can decide whether he wants to recognize the social contributions as a deduction from the tax base in the advance on income tax or directly as an expense in the KPiR. When deciding to deduct social contributions as a withholding tax, and when the taxpayer shows a loss on business at the end of the year, the contributions paid are "forfeited". Choosing the second method, i.e. including social contributions in tax deductible costs, will increase the resulting loss, which can be settled in subsequent years. Example 1.

Ms Danuta applies flat taxation and deducts ZUS contributions as a deduction from the tax base in the advance tax. The sum of social contributions paid during the year is PLN 1,000. At the end of 2020, it showed a loss of PLN 5,000. How to deduct ZUS contributions in the annual tax return for 2020?

Due to the fact that Ms Danuta showed a loss on her activity and deducted social contributions only in the advance for tax, she should not show the paid ZUS contributions in the PIT-36L tax return. This is due to the fact that the paid contributions will not increase the loss on the activity, and due to the fact that the tax base is less than 0, Ms Danuta has nothing to deduct the paid ZUS contributions.

Example 2.

Ms Emilia applies taxation on general principles and recognizes social contributions directly as an expense in the KPiR. The sum of the premiums paid is PLN 1,000. In 2020, it showed a loss of PLN 5,000. How to deduct ZUS contributions in the annual tax return for 2020?

Due to the fact that Emilia recognizes the social contributions paid as a cost in the KPiR, she does not show them in the annual tax return. The premiums paid are not lost because they increase the loss on business. On the other hand, Ms Emilia's paid health contributions could only be recognized as a tax deduction in the advance tax. In a situation where, at the end of the year, Emilia showed a loss on business, then she does not show health contributions in the annual tax return. These contributions are forfeited because there is no tax that can be deducted from you. ZUS contributions (social contributions, deducted from the tax base in advance payments, and health contributions), which cannot be shown in the annual tax return due to loss on activity, do not pass as a deduction in the following year. These contributions are forfeited because they can only be used in the year in which they were paid.

Lump sum on recorded income, tax card and social security contributions

When deciding to tax on a lump-sum basis, the basis for calculating the tax is the income obtained. However, when applying taxation on the basis of a tax card, the amount of tax is determined by the head of the tax office and is constant throughout the year. In both cases, the income tax paid during the year is not affected by the tax costs incurred. Therefore, in this situation, the entrepreneur does not deduct contributions to the Labor Fund and cannot decide to deduct social security contributions as a cost.

Taxpayers who chose a lump sum from recorded income may deduct social contributions only from the tax base, and health contributions from tax - only in advance tax.

Example 3.

Mr. Piotr chose lump-sum taxation on recorded revenues. In 2020, the paid and deductible ZUS contributions are as follows:

social insurance PLN 3,000,
health care PLN 1000.

Mr. Piotr showed in the PIT-28 statement the income in the amount of PLN 2,000. How to deduct ZUS contributions in the annual tax return?

Due to the fact that in the case of lump sum taxation on recorded income, social contributions may be recognized only as a deduction from the tax base, which is the income obtained, social contributions will reduce the base by PLN 2,000. The remaining amount of non-deducted contributions in the amount of PLN 1,000 and health contributions in the amount of PLN 1,000 will be forfeited because the tax base is PLN 0 (i.e. there is no need to deduct these contributions).

If the entrepreneur runs a business that may be taxed with a tax card, he knows the amount of income tax due in advance for the entire year. In such a situation, there is no right to deduct paid social security contributions. However, it can take advantage of the deduction of health contributions. In a situation where the entrepreneur did not deduct health insurance contributions during the year on the tax card, but only showed them as paid in the PIT-16A annual tax return, he / she may submit an application to the tax office for overpayment and reimbursement of premiums paid.

Start a free 30-day trial period with no strings attached!

How to mark the method of settling ZUS contributions in the annual tax return?

Entrepreneurs submit information on the method of settling social contributions to the office only at the time of generating the annual tax return in the PIT-B attachment. To generate an annual tax return in the wFirma.pl system, go to the tab: START »TAXES» ANNUAL DECLARATIONS »ADD DECLARATION and then select one of the appropriate forms:

Annual income tax declaration on general terms (PIT 36);
Annual flat income tax declaration (PIT 36L).

Attachment PIT-B is automatically added to the annual tax return form. If social contributions were deducted from the tax base, they should be included in the advance tax in:

PIT-36 form in item 192;
PIT-36L form in item 35.

If during the year social contributions were recognized directly as costs in the KPiR, their sum should be shown in Appendix PIT-B in part E. Information on social security contributions classified as tax deductible costs in item 34.

Due to the fact that health insurance contributions can only be recognized as a tax deduction, they are invariably shown only under one item of the annual tax return. Paid deductible health contributions are included in: